By Marc Jones
LONDON (Reuters) – The triple-A ratings of the World Bank and other top multilateral lenders would be at risk if U.S. President Donald Trump slashed his country’s support for them, credit rating agency Moody’s has warned, adding such a move was unlikely.
Last week, Trump signed an Executive Order to review U.S. government support to all international intergovernmental organisations of which it is a member and to withdraw from some United Nations organisations.
“The US is a key shareholder in a number of rated MDBs (multilateral development banks), hence it would be credit negative if it materially reduced its commitment to them,” Moody’s said in a report published on Monday.
The U.S. is the single biggest shareholder in the World Bank Group’s institutions, with a 16.4% share in its largest, the International Bank for Reconstruction and Development (IBRD), and a 19% stake in International Development Association (IDA) which provides concessional loans and grants to the world’s poorest countries.
The World Bank declined to comment on the Moody’s note.
It has an even higher 30% share in the Inter-American Development Bank in Latin America, a 15.6% stake in the Asian Development Bank and 10% in the European Bank of Reconstruction of Development that was set up in the wake of the Cold War.
The Trump-ordered review of Washington’s support for development banks is due to take roughly six months.
The set-ups of most of the institutions allow for an “orderly withdrawal” of a shareholder.
Moody’s said it was “unlikely that the U.S. would take drastic steps regarding its participation in key MDBs,” for several reasons, including the loss of influence over those institutions’ lending policies.
In the World Bank’s case, the U.S. has paid in capital of around $3.7 billion in the IBRD and has callable capital commitments of $49.2 billion, compared to disbursed and outstanding IBRD loans and guarantees of around $263 billion.
The average maturity of the IBRD’s loan portfolio is 8.4 years although some loans are for up to 50 years meaning that, “the US would remain on the hook for IBRD’s lending portfolio for many years to come,” Moody’s said.
A withdrawal would also open the door for other countries to fill the void, something unlikely to fit with Trump’s geopolitical strategy.
“Those shareholders in particular include China, which has long coveted a larger share in the IBRD, a desire strongly opposed by consecutive U.S. governments,” Moody’s said.
(Reporting by Marc Jones, additional reporting by Andrea Shalal in Washington; editing by Libby George, Toby Chopra and Nick Zieminski)
